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The Business Deal

So after I started getting interested in personal finance and reading all of ‘The Millionaire Next Door‘ type books, I started to realize that you have to do more than just collect paychecks from your boss if you really want to investing and start stacking chips.

I flirted extensively with buying rental properties. More on that here, when a slightly different kind of opportunity came knocking, a possible business deal.

My hippy friend had a clothing store that did OK, but died a premature death in the Great Unraveling that was 2008. Her friend, whom she had mentored, started a store across the street that did a lot better. (accessories vs clothing).

Anyway my hippy friend had a solid knack for picking out the next fashion trends but was lacking in capital. She wanted to buy the friend out and own the accessory business.

I used a HELOC, lent her $75,000 and made my first business deal.

We lawyered up for a contract and in the end I will get back my original loan at a rate of $1,250/month. Plus another $80,000 in month to month payments of 3.5% of gross profits.

We are in year FIVE of this arrangement. (started beginning of 2014) Everything is still going smoothly. We had some bumps in 2017 and 2018 over cash flow issues. The original loan is mostly paid back and the gross profits payments average $425/month.

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5 thoughts on “The Business Deal”

Interesting. I like that you dipped your toe in, and struck a business deal with your friend. People think you need a lot of “big deals” to make an impact towards passive income, but even many small deals can get you there as well. Keep us updated on how this goes, and if you decide to add to your lending “portfolio”…

Smart move, by the looks of things. Good that you made a contract to lock everything down. There are a lot of friendships that went south due to bad deals and arguments over money. You have a lot more guts than I do, respect for that!